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Comparing degrees of inequality aversion

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  • Kristof Bosmans

Abstract

We propose a straightforward dominance procedure for comparing social welfare orderings (SWOs) with respect to the degree of inequality aversion they express. We consider three versions of the procedure: (i) a criterion based on the Lorenz quasi-ordering which we argue to be the ideal version, (ii) a criterion based on a minimalist concept of inequality, and (iii) a criterion based on the relative differentials quasi-ordering. It turns out that the traditional Arrow-Pratt approach is equivalent to the latter two criteria for important classes of SWOs, but that it is profoundly inconsistent with the Lorenz-based criterion. With respect to the problem of combining extreme inequality aversion and monotonicity, criteria (ii) and (iii) identify as extremely inequality averse a set of SWOs that includes leximin as a special case, whereas the Lorenz-based criterion concludes that extreme inequality aversion and monotonicity are incompatible.

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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0517.

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Date of creation: Mar 2005
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Handle: RePEc:ete:ceswps:ces0517

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Keywords: Inequality Aversion; Lorenz; Leximin; Maximin; Risk Aversion;

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  1. Tungodden, B., 1999. "Egalitarianism: Is Leximin the Only Option?," Papers 4/99, Norwegian School of Economics and Business Administration-.
  2. Alain Chateauneuf & Patrick Moyes, 2004. "Lorenz Non-Consistent Welfare and Inequality Measurement," IDEP Working Papers 0406, Institut d'economie publique (IDEP), Marseille, France, revised May 2004.
  3. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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Cited by:
  1. Bart Capéau, 2013. "Size and distribution trade-offs for the leximin ordering," Journal of Economic Inequality, Springer, vol. 11(2), pages 237-248, June.
  2. Kristof Bosmans, 2006. "Extreme inequality aversion without separability," Public Economics Working Paper Series extrin, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  3. Yoram Amiel & Frank Cowell & Wulf Gaertner, 2012. "Distributional orderings: an approach with seven flavors," Theory and Decision, Springer, vol. 73(3), pages 381-399, September.
  4. Antoine Bommier & François Le Grand, 2013. "A Robust Approach to Risk Aversion," CER-ETH Economics working paper series 13/172, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. Bosmans Kristof, 2012. "Distribution-sensitivity of rank-dependent poverty measures," Research Memorandum 034, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  6. Antoine Bommier & Stéphane Zuber, 2012. "The Pareto Principle Of Optimal Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 593-608, 05.

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